Page 90 - Introduction to Business

64 PART 1 The Nature of Contemporary Business

Since 1990, both the Russian and Indian governments have moved to relatively open
trade systems and the volume of counter trade has fallen drastically. Yet, despite its
inefficiency, counter trade continues to be practiced in many developing countries.
In fact, several multinational companies have been forced to participate in counter
trade in order to sell their goods or services to some of these developing countries in
return for valuable natural resources like oil or minerals.

Embargoes. When sanctions are imposed on a country, they basically restrict
embargoes Trade sanctions that are trade with that country. These disruptions of trade are called embargoes. Embar-
imposed on a country and that restrict goes, which may not be universally enforced, are generally meant to punish a coun-
trade with that country
try for perceived unacceptable international behavior. Trade embargoes have been
used—largely for political reasons—against several countries over time. The United
States has had a trade embargo against communist Cuba for over 40 years. The
objective is to put pressure on the Cuban government to change its ways and bring
about economic and political freedom in Cuba. However, foreign policy experts
question whether the embargo has achieved its objective and suggest that it has
just hurt the average Cuban consumer. The embargo’s failure partly reflects the fact
that the sanction has been implemented largely on a bilateral (U.S.-Cuba) basis and
not multilaterally (by all countries) against Cuba. Prior to 1990, the United States
had imposed an embargo on shipment of grains (especially wheat) to the Soviet
Union at various times when the United States felt the Soviets had misbehaved, for
example, when the Soviets invaded Afghanistan in 1979.

reality How does the U.S. trade embargo against Cuba impact U.S. smokers?
CH ECK

The Foreign Exchange Market
and the Exchange Rate

LEARNING OBJECTIVE 5
Compare the rationales behind countries’ choices of exchange rate regimes.
In 2001, world merchandise trade totaled almost $12.5 trillion, which was greater
than the U.S. GDP of $10 trillion. In fact, U.S. exports alone in 2001 were $731 bil-
lion with imports running at $1.18 trillion. There are currently 191 countries in

A U.S. trade embargo against Cuba
has resulted in difficult times for
Cuban taxi owners, and they are
sometimes forced to improvise
spare parts that they cannot import
for their old American cars.

Copyright 2010 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.